IF you’re paying lots of interest on your overdraft, you’re probably spending more than you need to.
By using a 0 per cent credit card, it’s usually possible to clear the debt without paying any interest at all.
What are money transfer and balance transfer cards?
There are two main kinds of 0 per cent cards you can use; money transfer and balance transfer.
The main difference is that with a balance transfer you transfer the debt from your current account to your credit card.
With a money transfer you take money from your card to pay off the debt.
For a money transfer you’ll usually pay a 4 per cent fee to transfer the cash, while a balance transfer will often only cost you between 1.5 per cent and 3 per cent.
But these fees are usually less than paying high overdraft fees.
The other benefits of these cards is that they usually offer an introductory period where you’ll pay no interest on the transferred cash.
So if you use a 0 per cent card to pay down an overdraft debt, you know that all the money you’re paying is actually clearing what you owe, not paying off interest.
Ideally, you want to clear the debt within the introductory period, as once this ends you will be swapped onto a higher rate.
But even if you can’t pay it all off in that time, you’re usually still better off switching and paying as much as you can while there’s no interest added.
You may even be able to switch any leftover debt to a new 0 per cent deal.
What should I look out for when picking a money transfer card?
There are three main things you need to look at when choosing a card.
The first is how long the interest-only period will last; the longer it is, the more time you will have to pay off your debt interest-free.
It used to be the case that you could get deals that lasted for three or four years, but the longest money transfer deal at the moment has dropped to 32 months (just under three years).
The second factor to consider is how big the fee is. It will be charged as a percentage of your debt, so the lower the better.
Usually longer interest-free periods will have higher charges and vice versa, so think carefully about how much you can afford to repay each month and how much time you need.
The final thing to look at is what the interest rate will be when the introductory offer ends.
If you think you won’t pay all your debts off in time, you want to make sure the interest you will pay is reasonable.
Not everyone is eligible for all cards, so if you have a poor credit rating you may struggle.
Use an eligibility checker to see what you’re likely to be approved for, without it leaving a note on your credit file.
Even if you can’t access a great 0 per cent deal, it’s worth seeing if you can be approved for a lower interest card.
As long as you’re paying less interest than your bank was charging, you’ve got a good deal.
The cheapest 0 per cent cards
The cheapest 0 per cent money transfer cards on the market at the moment are charging fees of between two and three per cent.
The lowest fee is for the Virgin Money Travel Credit Card where you pay a 2 per cent fee.
In return you pay 0 per cent on the money transfer for the first twelve months.
In second and third place are the Capital One balance transfer card, which charges 2 per cent, and the MBNA 28-month money transfer card, which charges 2.99 per cent.
The cheapest 0 per cent balance transfer cards all come with no transfer fees.
They are the Santander Everyday Credit card, the Sainsbury’s Bank no balance transfer fee credit card, and the Lloyds Bank platinum balance transfer card.
The longest 0 per cent cards
The longest 0 per cent money transfer card is the MBNA 28-month money transfer card, which offers up to 28 months at 0 per cent, with a transfer fee of 2.99 per cent.
The next two longest deals also offer 28 months with 0 per cent interest, but with slightly higher transfer fees.
These are the Tesco Bank Clubcard money transfer card, which has a 3.94 per cent transfer fee, and the MBNA all round card, which has a 4 per cent fee.
Two balance transfer cards will let you pay 0 per cent interest for a whopping 32 months. The HSBC Balance Transfer card charges a fee of 1.4 per cent, while the Post Office Money Online card charges 2 per cent.
The MBNA platinum 30-month card gives you 30 months of 0 per cent interest and charges 1.49 per cent.
MORE ON MONEY STORIES
Santander offers a 27-month balance transfer card with no fee to help you clear your debts.
Martin Lewis reveals how to cut ALL your debt costs in seven steps.
Balance transfer card vs personal loan – the best way to pay off your debts.
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